11/10/2009 @ 4:20PM

Founder Of Dooney & Bourke Gets Jail In Bribery Case

Frederic Bourke, founder of accessories firm Dooney & Bourke, was sentenced to jail on Tuesday in a victory for the U.S. government and its expanding effort to crack down on foreign bribery by enforcing the Foreign Corrupt Practices Act. U.S. District Judge Shira Scheindlin handed down a jail term of one year and a day, followed by three years probation, and ordered Bourke to pay a $1 million fine in an afternoon hearing at the federal court in Manhattan. Bourke faced a maximum sentence of 10 years for violating the FCPA.

Bourke has indicated that he plans to appeal his conviction, which currently stands as a cautionary warning to American investors pursing interests abroad about the importance of conducting due diligence, especially in developing nations.

A federal jury convicted Bourke in July of paying bribes to gain advantage in post-Soviet oil deals in Azerbaijan. He was acquitted of a related money-laundering conspiracy charge. The case has been going on for more than four years.

Bourke had invested some $8 million in an effort set up by Victor Kozeny, a Czech entrepreneur known as the Pirate of Prague, to get in on the privatization of the Azeri national oil company. According to the U.S. government, Kozeny paid bribes to Azeri officials, ranging from cash to jewelry, and promised them future payments stemming from the oil deal. The Azeri government never ended up selling the oil company.

The FCPA is a 1977 law that made it illegal to pay foreign government officials to obtain contracts or other business. In this case, federal prosecutors alleged that Bourke knew and should have made efforts to know about the payments Kozeny made and promised. Bourke has denied the charges and claims he was a victim of Kozeny.

Kozeny, who has also been charged, is living in the Bahamas and fought off extradition efforts. He claims he is not subject to American law.

For years the FCPA was hardly enforced, but the FCPA has now become a difficult issue for American companies to confront. The Justice Department has said it is investigating at least 120 companies on five continents. Last year
Siemens
agreed to pay $800 million of fines to deal with U.S. government accusations that the company spent $1 billion to government officials around the world to secure infrastructure contracts. The fines were nearly twenty times the largest prior combined penalty for FCPA violations, a $44.1 million penalty paid by
Baker Hughes
in 2007.

FCPA issues even complicated Oracle’s effort to purchase
Sun Microsystems
, which said it might have violated bribery laws. The Securities & Exchange Commission has also ramped up its FCPA enforcement efforts, this year probing a former
Morgan Stanley
executive’s activities in China.